Retail Metrics: 14 Essential KPIs

for Tracking Your Business’

Performance
Francesca Nicasio • March 14, 2018 • No Comments

Numbers don’t lie, so if

you find yourself at a loss with what’s happening in your business,
one of first the things you should do is look at your retail metrics. Go
through your sales, inventory, and customer data to see if you can
figure out how you can improve.
What metrics should you look at? That depends. Each retail business
is different, so specific measures may be more significant to you
than others.
But to help point you in the right direction, here are 14 retail metrics
and KPIs to track in your business.
Sales metrics and KPIs
Sales are the lifeblood of any retail business, so it’s critical that you
keep a close eye on them. Consider the following KPIs:
1. Sales per square foot
This metric pertains to the amount of sales you generate per square
footage of sales space in your store. (Note: this doesn’t include
fitting rooms or stockrooms.)
You can calculate your sales per square foot using the following
formula:
net sales / amount of sales space 
Why measure your sales per square foot?
Retail sales per square foot is a good indicator of store productivity,
and it can also tell you if you’re making good use of space and
fixtures in your shop. You can use this metric when planning your
store layout and merchandise.
Certain stores and industries make their sales per square foot
public, which means knowing this metric will help you determine
how your business compares with others. Here’s a look at the
average sales per square footage in different retail sectors:
 Apparel – $336
 Specialty retail – $325
  Grocery – $510
How do you improve your sales per square foot?
The right sales and retail productivity tactics will depend on your store, but
here some general tips for improving your sales per square footage:

 Improve your store layout

 Have a winning product assortment
 Optimize your prices or promotions
 Increase transaction or basket value
 Train your staff to sell more
 Encourage people to stay longer in your shop
Related: How to Increase Retail Sales per Square Foot and Improve
Store Productivity
2. Sales per employee
Sales per employee is a measure that comes in handy when you’re
planning your staff’s schedules and initiatives. You can easily
measure it using this equation:
net sales / number of employees 
Why measure retail sales per employee?
This metric can help you make smarter employment decisions,
particularly when it comes to hiring, rostering, and compensation.
If you want to get more profound insights into your revenue and
staffing, go beyond the formula above and measure the revenue
generated by individual employees. The easiest way to do this is
through your point of sale system. Find a POS solution that tracks
sales per employee, and use that data to come up with sales targets
and determine who best associates are.
How do you improve your sales per employee?
The best way to improve on this metric is to get your associates to
generate more sales. Depending on your store, this may include
actions like:
 Setting smart sales goals per employee
 Investing in sales training
 Motivating your staff to perform better
Related: Want more specific tips? Check out our post on meeting
and beating your retail sales targets.
3. Conversion rate
The conversionn rate is the proportion of store visits to the number
of shoppers who made a purchase. To calculate it, use the formula:
number of sales / total number of visitors
Why measure your retail conversion rate?
Your conversion rate tells you how good you are at turning lookers
into buyers. Driving store visits is great, but traffic alone won’t add
much to your bottom line if your visitors don’t convert.
How do you improve your conversion rate?
Increasing your conversion rate starts with your employees. Be sure
to train and empower your associates to:
 Build rapport with customers
 Become “likable experts” who can provide product
information and insights
 Be convincing without being pushy
4-5. Gross and net profit
Your gross profit tells you how much you made after deducting the
costs of creating and selling the product. Calculate it using the
formula:
sales revenues – cost of goods sold 
Your net profit tells you how much you made after deducting your
cost of goods along with all other business expenses — including
administrative costs, operating expenses, etc. To find it, use the
equation:
all revenues – all expenses 
Why measure gross and net profit?
Your gross and net profit will indicate whether or not you’re actually
putting money in your pocket. Generating sales and revenue is
good, but at the end of the day, you need to make money out of
those sales.
Tracking these KPIs will help you make smarter decisions in various
aspects of your business. For instance, if your gross profit is on the
low side, then you may want to look into product sourcing and
determine if there’s a way to lower your cost of goods.
Not netting enough profit? Perhaps you should find ways to lower
your operating expenses.
How do you improve your gross and net profit?
You can try several profit-increasing strategies in your business.
Here are some quick ideas:
 Streamline your operations to reduce expenses
 Raise your prices
 Increase your average order value
 Implement savvier purchasing practices
 Optimize your vendor relationships
Related: Want to Improve Your Profit Margins? Here are 6 Tips to
Try
6. Average transaction value

This metric tells you how much shoppers spend on your store on
average. To find it, use the formula:
total revenue / number of transactions
Why measure your average transaction value?
This metric gives you a general idea of how much people are
spending. A high dollar amount could mean that shoppers are
purchasing your more expensive products or they’re buying larger
quantities.
You could derive some insights and action steps from this KPI. For
instance, having a low average dollar per transaction could indicate
that you need to rethink your pricing. Or, it could mean that you
have to implement new sales tactics such as upsells, bundles, or
other offers to get shoppers to spend more.
How to increase your average order value
Look into upselling or cross-selling. Done right, both tactics enable
you to increase sales while helping customers at the same time.
The key to upselling or cross-selling success is doing it correctly and
at the right time and place. If you upsell a product that’s irrelevant
or if you’re selling in such a way that you’re coming off as pushy,
then you’ll not only fail to convert the customer, but you might even
lose the original sale.
The #1 rule here is to always provide value. Yes, getting someone
to upgrade their purchase or to buy an additional item will benefit
you, but the deal must also be advantageous to the customer.
7. Online sales relative to brick-and-mortar
locations

This is new metric that benefits omnichannel retailers —

i.e., retailers that are selling online and offline.
To measure it, you need to look at your ecommerce
analytics and see how much traffic or revenues are
generated from locations where you have a brick-and-
mortar presence.
For example, let’s say you just opened a new store in Austin,
TX. You can measure the impact of your store on ecommerce
by looking at web traffic and sales from users in relevant zip
codes (i.e., zip codes in Austin and surrounding areas.)
Why measure the impact of physical retail on digital?
Consumers today are increasingly using multiple channels to shop,
so you need to get a handle on how your physical presence
influences your ecommerce sales. These days, crediting sales to a
single channel isn’t enough, when people are interacting with your
brand in many different ways and places.
8. Year over year growth
If your business growing? How better off are you compared to your
previous years in business? To figure this out, calculate your year
over year revenue growth with the following equation:
(current period revenue – prior period revenue) / prior
period revenue x 100
Why measure YOY growth?
Continuous improvement is a goal you want to strive for, and the
best way to track your progress is to measure your current results
against the previous period. This will help you track how your
business doing so you can react accordingly.
For example, if you find that you’re falling behind and your business
isn’t performing as well as the previous year, then you can strive to
change that.
How to improve your YOY growth
The first step to improving this is to figure out why you’re not
growing at your ideal rate. If your growth has stalled, then drill down
on the reason behind it. Is it the market? Are you failing to keep up
with the latest trends? Is a competitor eating up market share?
Whatever the case, figure out the reason and then take the
necessary steps to improve.
Inventory metrics and KPIs
Getting your inventory levels “just right” is a tricky task, but it’s
completely doable with the help of the metrics below.
9. Stock turn
Also known as inventory turnover, this metric pertains to the
number of times stock is sold through or used in a given time
period. Calculate it using the formula:
cost of goods sold / average inventory
Why measure stock turn?
Stock turn is a critical metric for determining your optimal inventory
levels. If your stock turn is too low, then it means you’re not selling
out of inventory fast enough, and you risk carrying slow or dead
stock.
However, if your stock turn is too fast (i.e., you’re selling out of the
product 4 or more times a year), then it could mean that you’re not
stocking up enough, and customers are continually dealing with out
of stocks.
How to improve stock turn
It all depends. If your inventory turnover is too low,  you need to be
leaner with your merchandise and avoid over-ordering products. You
should also make it a goal to move your slow-moving or dead
merchandise ASAP. Here are some posts to help you do just that:
Dealing with high stock turn? Optimize your stock ordering
procedures to ensure that you’re not running out of inventory too
frequently.
10. GMROI
Gross Margin Return on Investment (GMROI) measures your profit
return on the funds invested in stock. It answers the question, “For
every dollar invested in inventory, how many dollars did I get back?”
The formula for GMROI is:
gross profit / average inventory
Why measure GMROI?
GMROI tells you how much money your inventory has made. You
use this metric to figure out if your stock is turning a profit. It’s
typically measured for specific products or categories because it can
give you a good idea of which types of merchandise are worth
carrying in your shop.
How to improve your GMROI
To increase your GMROI, ask yourself, how can I get more money
out of my merchandise?Accomplishing that can mean:
 Increasing your prices
 Lowering your cost of goods 
 Improving profit margins 
 Improving inventory turnover
11. Sell-through

Sell through is the percentage of units sold versus the number of

units that were available to be sold. It’s expressed in percentage
form using the formula:
number of units sold / beginning inventory x 100
Why measure sell-through?
Sell through is a great way to evaluate merchandise performance. It
also helps you figure out the speed at which a product is selling so
you can make the right purchasing decisions.
For example, let’s say you’ve stocked up on a new style of shoes
and saw that you’ve sold through 80% of your inventory in just a
week — which is unusually fast for your shop. You can use that
insight to figure out how much to order so you don’t run out
prematurely.
How to improve sell-through
The steps required to strengthen sell-through depends on your
situation. A high sell-through rate could mean that you need to
stock up on merchandise (unless of course, you’re deliberately
trying to sell out of the item).
On the other hand, a slow sell-through rate means the item isn’t
moving fast enough, and you need to figure out how to sell more.
Should you run a promotion? Mark it down? Again, the right answer
depends on your store’s situation.
12. Shrinkage
Shrinkage pertains to a loss of inventory that isn’t caused by actual
sales. The common causes of shrinkage are employee theft,
shoplifting, administrative errors, and supplier fraud. To calculate it,
use the formula:
ending inventory value – physically counted inventory value
Why measure shrinkage?
The last thing you want is to lose product or money to things like
theft or admin errors. Tracking shrinkage keeps you vigilant and
helps ensure that nothing shady is going on in your business.
How to reduce shrinkage
The right way to deal with shrinkage depends on what’s causing it. If
it’s consumer theft, then you need to work on beefing up store
security. Dealing with employee theft? Work on hiring the people
and setting up procedures to prevent inside jobs from happening.
Tightening up your processes also works for admin errors and
vendor fraud.
Featured Resource

Vend’s Excel inventory and sales

template helps you stay on top of your inventory and sales by
putting vital retail data at your fingertips.
We compiled some of the most important metrics that you should
track in your retail business, and put them into easy-to-use
spreadsheets that automatically calculate metrics such as GMROI,
conversion rate, stock turn, margins, and more.

LEARN MORE
Customers
In this section, we discuss some of the top customer-centric metrics
to look at:
13. Foot traffic
This one is pretty straightforward. Foot traffic refers to the number
of people who walk into your store. You can measure it using
people counters and retail analytics software.
Why measure foot traffic?
Foot traffic helps you evaluate your marketing and advertising
efforts. For example, if you recently launched a promotion to drive
people to your shop, then looking at your foot traffic can tell you
whether or not your campaign was successful.
This is also a significant metric for evaluating the success of your
window displays.  
How to improve foot traffic
There are various ways to drive traffic to your brick and mortar
store. Some of our favorites include:
 Increasing your curb appeal
 Leveraging digital tools such as click and collect, online
business listings, Google’s Local Inventory Ads, etc.
 Holding events
 Driving traffic from existing customers
Related: 7 Proven Ways to Drive Foot Traffic to Your Retail Store
14. Customer retention
You’ve worked hard to get new customers, so it’s only right that you
figure out whether or not you’re keeping them. There are a number
of ways to find your customer retention rate, but here’s a relatively
simple formula from Inc.com:
((CE-CN)/CS)) x 100
CE = number of customers at the end of period
CN = number of new customers acquired during period
CS = number of customers at start of period
Why measure customer retention?
Your customer retention rate tells you the amount of customers that
return to your store. This metric is an excellent gauge for customer
service, product performance, and loyalty.
How to improve customer retention
Getting people to come back boils down to how well you manage
your customer relationships. Doing that can mean various things
including:
 Tracking customer purchases and offering personalized
recommendations
 Developing meaningful relationships through amazing
customer service as well as community-building efforts like
classes, events, or online groups
 Implementing a killer loyalty program to encourage shoppers
to keep coming back
Further Reading
 Want more information on critical metrics?
Download Vend’s Retail KPIs guide, a resource that gives you a
deep look at the numbers you should be tracking in your business.
Download the guide and you will:

 Learn which metrics can help you make smarter forecasts and
decisions
 Discover the formulas that’ll help you identify your KPIs so you can
start measuring your way to the top
 Wise up on the metrics that you need to track, and know exactly when
and how to measure them

LEARN MORE

What’s next?
There are two things you can do now that you know which retail
metrics are worth tracking your business.
The first is to figure out who to efficiently measure these on a
regular basis. Formulas are useful, but you’ll save time by
automating data and metric-tracking in your business.
Invest in a retail solution with robust reporting and analytics
capabilities, so you can focus less on manual calculations and get
straight to the insights you need.
Next is to take action. It’s not enough to know your metrics; you
need to do something with your data. Use the info that you gain to
identify areas for improvement, and then take the necessary steps
to level up your game.